Equities
Stocks on both sides of the border gained at Thursday’s opening bell, adding to the previous session’s Fed-inspired rally amid signals that U.S. borrowing costs will fall in the new year.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 52.66 points, or 0.26 per cent, at 20,682.11.
In the U.S., the Dow Jones Industrial Average rose 25.39 points, or 0.07 per cent, at the open, to 37,115.63.
The S&P 500 opened higher by 13.95 points, or 0.30 per cent, at 4,721.04, while the Nasdaq Composite gained 64.76 points, or 0.44 per cent, to 14,798.72 at the opening bell.
Interest rates remain a key driver for stocks after the Federal Reserve held borrowing costs steady, as expected, on Wednesday afternoon but also struck a dovish tone and suggested the discussion of rate cuts is now coming “into view”. A number of Wall Street banks moved forward their forecasts for the start of rate cuts in the wake of the comments with Goldman Sachs now forecasting three consecutive quarter point rate cuts next year starting in March followed by another 25-basis-point reduction later in the year.
“There’s been a lot of debate in recent weeks about whether investors are getting ahead of themselves, too optimistic about how quickly the Fed will cut rates but the message from the central bank is that is not the case,” OANDA senior analyst Craig Erlam said. “And in typical fashion, investors have now gone further, pricing in six rate cuts next year starting in March.
“That’s also forced investors to reassess whether they’re in fact too pessimistic with other central banks too.”
The European Central Bank and the Bank of England are among world central banks making rate decisions on Thursday. Both held rates steady, as expected. Mr. Erlam noted that the ECB is expected to cut rates by 150 basis points over the next 12 months and the BoE between 100 and 125 basis points. Earlier, Switzerland’s central bank kept rates unchanged while Norway’s central bank surprised by rising rates.
In Canada, Bank of Canada Governor Tiff Macklem is scheduled to speak in Toronto on Friday.
Elsewhere, Canadian investors got a snapshot of the health of the country’s real estate market this morning, with new figures from the Canadian Real Estate Associations.
CREA said national home sales slid 0.9 per cent month-over-month in November. Activity was 0.9-per-cent below that seen in November, 2022. The number of newly listed homes fell 1.8 per cent on a monthly basis. The MLS Home Price Index decreased 1.1 per cent month-over-month but was still up 0.6 per cent year-over-year, the association said.
On the corporate side, Sobeys-parent Empire Co. Ltd. reported a second-quarter profit of $181.1-million or 72 cents per diluted share, down from $189.9-million or 73 cents in the same quarter last year. Sales for the quarter totalled $7.75-billion, up from $7.64-billion in the same quarter last year.
Overseas, the pan-European STOXX 600 was up 1.39 per cent by midday. Britain’s FTSE 100 jumped 1.65 per cent. Germany’s DAX and France’s CAC 40 added 0.60 per cent and 1.14 per cent, respectively.
In Asia, Japan’s Nikkei finished down 0.73 per cent. The Bank of Japan’s policy decision is due next week. Hong Kong’s Hang Seng added 1.07 per cent.
Commodities
Crude prices were up, buoyed by a dovish Fed, a softer U.S. dollar and a bigger-than-expected decline in weekly U.S. inventories.
The day range on Brent was US$74.44 to US$75.70 in the early premarket period. The range on West Texas Intermediate was US$69.54 to US$70.79. Both benchmarks were up nearly 2 per cent in the predawn period.
“The prospect of deep rate cuts from central banks next year has boosted the global economic prospects and in turn the price of oil,” OANDA’s Craig Erlam said in an early note.
“The question now is whether central banks are responding just in time or whether it will prove to be just too late. Oil prices over the coming weeks may offer some insight into market expectations on that.
Sentiment drew support from figures released Wednesday by the U.S. Energy Information Administration showing a bigger-than-expected 4.3 million barrel decline in stockpiles last week. Similarly, prices benefitted from a lower U.S. dollar following indications of future Fed rate cuts. A weaker dollar makes crude less expensive for holders of other currencies.
Meanwhile, the International Energy Agency raised its demand forecast for next year early Thursday morning. World consumption will rise by 1.1 million barrels per day in 2024, the Paris-based IEA said in a monthly report, up 130,000 bpd from its previous forecast, Reuters reported.
In other commodities, spot gold was up 0.4 per cent at US$2,034.99 per ounce by early Thursday morning, after rising more than 2 per cent on Wednesday. U.S. gold futures jumped 2.6 per cent to US$2,049.80.
“A weaker dollar and lower yields, if sustained, could continue to boost gold at a time when traders are feeling much more optimistic,” Mr. Erlam said. “Perhaps gold could enjoy a Santa rally of its own this year.”
Currencies
The Canadian dollar was up while its U.S. counterpart traded near a four-month low against a group of currencies on expectations that U.S. rates will begin falling in the new year.
The day range on the loonie was 73.95 US cents to 74.35 US cents. The dollar was near the upper end of that range in the early premarket period. The Canadian dollar has gained roughly 1 per cent against its U.S. counterpart over the past five days.
The U.S. dollar index, which weighs the greenback against a basket of currencies, was down 0.29 per cent in early trading at 102.58. Earlier in the session, the index hit its lowest level since August.
The euro was up 0.31 per cent at US$1.0909 while Britain’s pound added 0.36 per cent to US$1.2664.
In bonds, the yield on the U.S. 10-year note was down at 3.949 per cent ahead of the North American open.
More company news
Transat AT Inc. reported a profit of $3.2-million in its latest quarter compared with a loss a year ago as its revenue rose more than 30 per cent. The travel company says the profit amounted to eight cents per share for the quarter ended Oct. 31 compared with a loss of $126.2-million or $3.32 per share in the same quarter last year. Revenue for what was Transat’s fourth quarter totalled $764.5-million, up from $573.1-million a year earlier. -The Canadian Press
TMX Group, the owner of the Toronto Stock Exchange, said on Wednesday it had acquired an around 78% stake in U.S. data analytics company VettaFi Holdings for US$848-million. In January, the group took a 21% stake in the New York City-based firm, which values the total deal at $1.03-billion. The deal will be financed through bank debt of up to $1-billion in term loans, and will add to TMX’s adjusted earnings per share in the first year of the deal, excluding synergies, the company said in a statement. -Reuters
Pembina Pipeline said on Wednesday it would buy Enbridge’s interests in the Alliance Pipeline, Aux Sable and NRGreen joint ventures for $3.1-billion. Alliance delivers liquids rich natural gas sourced in Northeast B.C., Northwest Alberta and the Bakken region to Chicago. Aux Sable operates NGL extraction and fractionation facilities in both Canada and the U.S., with extraction rights on Alliance, offering connectivity to key U.S. natural gas liquids hubs. -Reuters
Cenovus Energy said on Thursday it expects higher production from its U.S. refineries in 2024 as the Canadian company’s two refineries restarted operating at full capacity. The company had been grappling with production snags following a deadly fire at its refinery in Toledo, Ohio last year and an explosion at the refinery in Superior, Wisconsin in 2018. Cenovus forecast downstream throughput for 2024 between 630,000 and 670,000 barrels per day (bpd), compared with 580,000 bpd to 610,000 bpd expected this year. -Reuters
Economic news
(8:30 a.m. ET) Canadian manufacturing sales and orders for October.
(8:30 a.m. ET) Canadian new motor vehicle sales for October.
(8:30 a.m. ET) U.S. initial jobless claims for week of Dec. 9.
(8:30 a.m. ET) U.S. retail sales for November.
(8:30 a.m. ET) U.S. import prices for November.
(9 a.m. ET) Canadian existing home sales for November.
(9 a.m. ET) Canada’s MLS Home Price Index for November.
(9:45 a.m. ET) U.S. S&P Global PMIs for December.
(10 a.m. ET) U.S. business inventories for October.
With Reuters and The Canadian Press
Terry Weber